Monday, September 27, 2010

With recent high energy prices, the passage of major energy legislation in 2005 (P.L. 109-58) and 2007 (P.L. 110-140), and the passage of a new farm bill in 2008 (P.L. 110-246), there is ongoing congressional interest in promoting alternatives to petroleum fuels. Biofuels—transportation fuels produced from plants and other organic materials—are of particular interest.

Ethanol and biodiesel, the two most widely used biofuels, receive significant government support under federal law in the form of mandated fuel use, tax incentives, loan and grant programs, and certain regulatory requirements. The 22 programs and provisions listed in this report have been established over the past three decades, and are administered by five separate agencies and departments: Environmental Protection Agency, U.S. Department of Agriculture, Department of Energy, Internal Revenue Service, and Customs and Border Protection. These programs target a variety of beneficiaries, including farmers and rural small businesses, biofuel producers, petroleum suppliers, and fuel marketers. Arguably, in prior years the most significant federal programs for biofuels have been tax credits for the production or sale of ethanol and biodiesel. However, with the establishment of the renewable fuel standard (RFS) under P.L. 109-58, Congress has mandated biofuels use; P.L. 110-140 significantly expanded that mandate. In the long term, the mandate may prove even more significant than tax incentives in promoting the use of these fuels.

The 2008 farm bill—The Food, Conservation, and Energy Act of 2008—amended or established various biofuels incentives, including lowering the value of the ethanol excise tax credit, establishing a tax credit for cellulosic biofuel production, extending import duties on fuel ethanol, and establishing several new grant and loan programs.

Some key biofuels incentives have expired or are set to expire (e.g., tax credits for biodiesel, renewable diesel, and ethanol), and there is congressional interest in extending these credits.

This report outlines federal programs that provide direct or indirect incentives for biofuels. For each program described, the report provides details including administering agency, authorizing statute(s), annual funding, and expiration date. The Appendix provides summary information in a table format.

Date of Report: September 15, 2010
Number of Pages: 18Order Number: R40110Price: $29.95

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The European Union’s (EU) Emissions Trading Scheme (ETS) is a cornerstone of the EU’s efforts to meet its obligation under the Kyoto Protocol. It covers more than 10,000 energy intensive facilities across the 27 EU Member countries; covered entities emit about 45% of the EU’s carbon dioxide emissions. A “Phase 1” trading period began January 1, 2005. A second, Phase 2, trading period began in 2008, covering the period of the Kyoto Protocol. A Phase 3 will begin in 2013 designed to reduce emissions by 21% from 2005 levels.

Several positive results from the Phase 1 “learning by doing” exercise assisted the ETS in making the Phase 2 process run more smoothly, including: (1) greatly improving emissions data, (2) encouraging development of the Kyoto Protocol’s project-based mechanisms—Clean Development Mechanism (CDM) and Joint Implementation (JI), and (3) influencing corporate behavior to begin pricing in the value of allowances in decision-making, particularly in the electric utility sector.

However, several issues that arose during the first phase were not resolved as the ETS moved into Phase 2, including allocation schemes and new entrant reserves, and others. A more comprehensive and coordinated response by the EU has been made for Phase 3 with harmonized and coordinated rules being developed by the European Commission.

The United States is not a party to the Kyoto Protocol. However, five years of carbon emissions trading has given the EU valuable experience in designing and operating a greenhouse gas trading system. This experience may provide some insight into cap-and-trade design issues currently being debated in the United States.

· The EU-ETS experience illustrates the importance of having reliable emissions data for all facilities covered under a cap-and-trade scheme; data that are pivotal for developing allocation systems, reduction targets, and enforcement provisions.

· In the United States debate continues on comprehensive versus sector-specific reduction programs; the EU-ETS experience suggests that adding sectors to a trading scheme once established may be a slow, contentious process.

· As with most EU industries, most U.S. industry groups either oppose auctions outright or want them to be supplemental to a base free allocation. The EU-ETS experience suggests Congress may want to consider specifying any auction requirement if it wishes to incorporate market economics more fully into compliance decisions.

· EU-ETS analysis suggests the most important variables in determining Phase 1 allowance price changes were oil and natural gas price changes; this apparent linkage raises possible market manipulation issues, particularly with the inclusion of financial instruments such as options and futures contracts. The EU will examine the matter in preparation for Phase 3. Congress may consider whether the government needs enhanced regulatory and oversight authority over such instruments.

Date of Report: September 10, 2010
Number of Pages: 23Order Number: R41049Price: $29.95

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Wednesday, September 22, 2010

The Environmental Protection Agency (EPA) published its final revisions to the National Ambient Air Quality Standards (NAAQS) for particulate matter (particulates, or PM) on October 17, 2006. EPA’s actions leading up to and following promulgation of the 2006 standard have been the subject of considerable congressional oversight. EPA and states’ ongoing implementation of the standard, beginning with the designation of those geographical areas not in compliance, likewise has been an area of concern and debate among some Members of Congress, states, and other stakeholders for some time. EPA’s more recent initiation of the next round of periodic review of the particulates NAAQS, and speculation as to the degree of stringency of any new standards, has prompted further scrutiny of the ongoing implementation. EPA is due to propose revised standards in February 2011 and promulgate them by October 2011.

Promulgation of NAAQS sets in motion a process under which the states and EPA identify areas that exceed the standard (“nonattainment areas”) using multi-year air quality monitoring data and other criteria, requiring states to take steps to reduce pollutant concentrations in order to achieve it. On November 13, 2009, EPA published its final designations for the 2006 PM NAAQS that include 120 counties and portions of counties in 18 states as nonattainment areas based on 2006 through 2008 air quality monitoring data. The final designations, which include tribal land of 22 tribes, were effective as of December 14, 2009. States have three years from the effective date to submit State Implementation Plans (SIPs), which identify specific regulations and emission control requirements that would bring an area into compliance.

In December of 2008 EPA had identified 211 counties and portions of counties (58 areas) in 25 states for designation as nonattainment for the 2006 PM NAAQS based on 2005 through 2007 data. The publication of these designations—and thus the effective date of the final designations—was delayed pending review by the current Administration. This review and the availability of more current air quality monitoring data resulted in the final designations published in November 2009.

The 2006 NAAQS strengthened the pre-existing (1997) standard for “fine” particulate matter 2.5 micrometers or less in diameter (PM2.5) by lowering the allowable daily concentration of PM2.5 in the air. The daily standard averaged over 24-hour periods is reduced from 65 micrograms per cubic meter (μg/m3) to 35 μg/m3. However, the annual PM2.5 standard, which addresses human health effects from chronic exposures to the pollutants, is unchanged from the 1997 standard of 15 μg/m3. The 2006 NAAQS did not substantially modify the daily standard for slightly larger, but still inhalable, particles less than or equal to 10 micrometers (PM10), retaining the 24-hour standard but revoking the annual standard for PM10.

EPA’s final nonattainment designations are only for the revised 2006 24-hour PM2.5 standard. EPA did not require new nonattainment designations for PM10. The final designations for the 2006 PM2.5 NAAQS include a few areas designated nonattainment for PM2.5 for the first time, but, as expected, the majority of the counties identified overlap with EPA’s final nonattainment designations for the 1997 PM2.5 NAAQS. EPA’s designations for the 1997 PM2.5 NAAQS included all or part of 204 counties in 20 states and the District of Columbia. Most of them were only exceeding the annual standard; only 12 counties were exceeding both the 24-hour and the annual standards. Thus, the 2006 tightening of the 24-hour standard resulted in an increased number of areas being designated nonattainment based on exceedances of both the 24-hour and the annual standards. .

Date of Report: September 7, 2010
Number of Pages: 39Order Number: R40096Price: $29.95

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Tuesday, September 21, 2010

Robert Esworthy Specialist in Environmental Policy
James E. McCarthy Specialist in Environmental Policy

Following its review of more than 2,000 scientific studies, on October 17, 2006, the Environmental Protection Agency (EPA) published its final revisions to the National Ambient Air Quality Standards (NAAQS) for particulate matter (particulates, or PM). Several states and industry, agriculture, business, and environmental and public health advocacy groups petitioned the court, challenging certain aspects of EPA’s revisions. A February 24, 2009, decision by the U.S. Court of Appeals for the District of Columbia Circuit granted the petitions in part, denying other challenges, and remanded the standards to EPA for further consideration. While the court did not specifically vacate the 2006 PM standards, EPA has announced its intention to accelerate its ongoing next round of the periodic review of the particulates NAAQS, in part, in response to the court’s decision. These actions, and EPA’s ongoing implementation of the 2006 PM NAAQS, have prompted renewed interest among Members of Congress.

Experiences and issues leading up to and following the promulgation of the 2006 PM2.5 NAAQS could provide relevant insights as EPA proceeds with its current review of the particulates NAAQS. Although a tightening of the standards, the 2006 particulates NAAQS are not as stringent as recommended by EPA staff or the independent scientific advisory committee mandated under the Clean Air Act (Clean Air Scientific Advisory Committee, or CASAC). The divergence from the CASAC’s recommendations proved controversial, as did several other elements of the 2006 particulates NAAQS, including the decision not to exclude rural sources from the coarse particle standard. Some have also questioned the EPA’s strengthening of the standard for all fine particles, without distinguishing their source or chemical composition.

The EPA found that the evidence continued to support associations between exposure to particulates in ambient air and numerous significant health problems. Based on several analytical approaches, the EPA estimated that compliance with the revised NAAQS will prevent 1,200 to 13,000 premature deaths annually, as well as substantial numbers of hospital admissions and missed work or school days due to illness. Based on these findings, EPA revised the PM NAAQS by strengthening the preexisting (1997) standard for “fine” particulate matter 2.5 micrometers or less in diameter (PM2.5) by lowering the allowable daily concentration averaged over 24-hour periods of PM2.5 in the air. The annual PM2.5 standard, which is set in addition to the daily standard to address human health effects from chronic exposures to the pollutants, is unchanged from the 1997 standard. The decision not to tighten the annual standard was reversed by the D.C. Circuit and remanded to EPA for consideration.

The 2006 particulates NAAQS also retained the 24-hour standard and revoked the annual standard for slightly larger, but still inhalable, particles less than or equal to 10 micrometers (PM10). The EPA abandoned its proposal to replace the particle size indicator of PM10 with a range of 10 to 2.5 micrometers (PM10-2.5). The D.C. Circuit’s February 24, 2009, decision upheld EPA’s decisions with regard to PM10 NAAQS.

EPA’s ongoing implementation of the 2006 NAAQS, including EPA’s November 13, 2009, final designation of those geographical areas not in compliance (typically defined by counties or portions of counties), has been an area of debate among some Members of Congress, states, and other stakeholders. Although EPA is not requiring new nonattainment designations for PM10, the tightening of the PM2.5 standard increased the number of areas in nonattainment. EPA’s final designations for the 2006 PM NAAQS include 120 counties and portions of counties in 18 states as nonattainment areas based on 2006 through 2008 air quality monitoring data.

Date of Report: August 26, 2010
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This report provides background on the emerging conflict over interpretation and implementation of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) and the Clean Water Act (CWA). For the more than 30 years since they were enacted, there had been little apparent conflict between them. But their relationship has recently been challenged in several arenas, including the federal courts and regulatory proceedings of the Environmental Protection Agency (EPA). In this report, a brief discussion of the two laws is followed by a review of the major litigation of interest. EPA’s efforts to clarify its policy in this area are discussed, including a regulation issued in 2006 that was subsequently vacated by a federal court, as well as possible options for EPA and Congress to address the issues further.

FIFRA governs the labeling, distribution, sale, and use of pesticides, including insecticides and herbicides. Its objective is to protect human health and the environment from unreasonable adverse effects of pesticides. It establishes a nationally uniform labeling system requiring the registration of all pesticides sold in the United States, and requiring users to comply with the national label. The CWA creates a comprehensive regulatory scheme to control the discharge of pollutants into the nation’s waters; the discharge of pollutants without a permit violates the act.

Several federal court cases testing the relationship between FIFRA and the CWA have drawn attention since 2001. In two cases concerning pesticide applications by agriculture and natural resources managers, the U.S. Ninth Circuit Court of Appeals held that CWA permits are required for at least some discharges of FIFRA-regulated pesticides over, into, or near U.S. waters. It held in a third case that no permit was required for the specific pesticide in question. Most recently, the U.S. Second Circuit Court of Appeals ruled in March that a CWA discharge permit for mosquito control activities is not required before April 2011, when EPA is expected to issue a CWA general permit covering such activities.

Several of the rulings alarmed a range of stakeholders who fear that requiring CWA permits for pesticide application activities would present significant costs, operational difficulties, and delays. Pressed to clarify its long-standing principle that CWA permits are not required for using FIFRA-approved products, EPA in 2006 issued a rule to formalize that principle in regulations. Environmental activists strongly opposed EPA’s actions, arguing that FIFRA does not protect water quality from harmful pollutant discharges, as the CWA is intended to do. Other stakeholders, such as pesticide applicators, endorsed the rule, although some would like to see its application broadened to include pesticide drift. The EPA rule was challenged, and in January 2009 a federal court vacated the regulation. Several industry groups petitioned for a rehearing by the full Sixth Circuit Court of Appeals, while the federal government asked the court to stay the order vacating the exemption for two years (until April 2011), to provide time for working with states to develop a general permit for pesticide applications covered by the decision. The court denied the request for rehearing and granted the government’s request for a two-year delay. EPA proposed a draft general permit in June 2010. The Supreme Court declined to review the case.

Some believe that the controversy will only be resolved by congressional action to clarify the intersecting scope of the Clean Water Act and FIFRA. Legislation intended to nullify the 2009 federal court ruling has been introduced in the 111th Congress (H.R. 6087/S. 3735).

Date of Report: August 31, 2010
Number of Pages: 18Order Number: RL32884Price: $29.95

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